Sri Lanka crisis: Central bank lays out extent of economic problems

The size of Sri Lanka’s worst economic crises in more than 70 years has been determined by the country ‘ central banks.

The bank explained in its yearly report how wages fell short of the skyrocketing cost of everything from bread to fuel last year.

According to the bank,” a number of natural flaws” and” policy mistakes” contributed to causing the South Asian country to experience severe financial problems.

The lender next anticipates a resurgence of economic growth in the coming year.

The Central Bank of Sri Lanka forecast the economy will shrink by 2% this year, but expand by 3.3% in 2024.

Compared to the International Monetary Fund ( IMF ), which predicted a 3.5 % contraction in 2023 and 1.5 % growth the following year, the prediction is more upbeat.

The report from the central bank also described how prices of fresh fruit, wheat, and eggs more than doubled in September, causing headline inflation to reach almost 70 %.

The cost of travelling and basic services like electricity and water increased even more quickly at the same time.

The nation’s economy contracted by 7.8 % last year, and it made its first foreign debt default since gaining its independence from the UK in 1948.

Failures occur when governments are unable to fulfill all or some of their debt obligations to debts.

Its history with creditors was damaged as a result, making it more difficult to take out loans on foreign markets.

According to the state,” the Sri Lankan business experienced its most difficult year in its post-independence history.”

It continued,” An” unsustainable” financial style” steered the country towards a varied catastrophe.”

Sri Lanka owes China and India approximately$ 7 billion(£ 5.7 billion ). Both nations decided to rebuild their payments in February, giving Sri Lanka more time to pay them back.

The IMF agreed to lend Sri Lanka$ 3 billion last month. That was on top of the World Bank’s$ 600 million payment from the previous year.

Before the IMF evaluates the environment in September, Sri Lanka’s authorities is presently negotiating its mortgage payment with borrowers and creditors.